Walmart China focuses on trust

24 February 2014

BEIJING: Walmart, the world's largest retailer, is undertaking a fundamental review of its retail offer in China, where its performance has been flagging in recent years.

The company, which has been operating in China since it opened its first outlet in 1996, is closing at least 29 stores in the country amid signs that Chinese shoppers have not taken to its "big box" superstore concept.

It is also moving to meet the Chinese preference for quality and safety over low prices by focusing more on its own private-label products and imported goods, Reuters reported.

Raymond Bracy, head of corporate affairs at Walmart China, said the company is re-organising its supply chain, building its own distribution centres to manage quality levels and closing some stores because the retailer had become too "enamoured with growth". Instead, "we're focusing on quality first," he stressed.

Echoing his comments, Walmart China CEO Greg Foran said: "If you went out and asked members or customers, 'What's your single biggest worry?' they'll tell you trust and authenticity. Once you've got their trust, the next question they ask themselves is, 'How much is it?'"

With food safety an ongoing issue for Chinese consumers, who look to large foreign brands for reliability and quality, Foran said Walmart China wants private label products to account for at least 20% of its sales within the next ten years.

The company has been hit by a number of food scandals – most recently, in January it had to recall its popular "Five Spice" donkey meat after tests showed traces of fox meat.

Bracy expected the company's fortunes could improve – it was overtaken as market leader in 2009 and now ranks third in China behind two domestic chains – by focusing on food quality, especially for fresh produce and meat.

Important by itself, food is also a driver for purchases of other products in Chinese hypermarkets and Bracy said "that's the most fundamental thing about getting food right". If Walmart loses the food purchase, he said, it could also lose "the jean purchase".